The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), has said that the Petroleum Industry Act, PIA, 2021 may not stop the gale of divestments by international oil companies(IOCs), operating in the Nigerian oil and gas sector.
Since the law was signed in August 2021, by President Muhammadu Buhari, after the bill dragged at the National Assembly for over two decades, operators in the oil sector including government officials have been optimistic that the Act would attract enormous gains to the industry.
However, IOCs operating in Nigeria have been divesting their assets from Nigeria before and after the PIA became law, as the RMAFC explained, the Act might not halt the divestments by the international oil firms.
The commission made the disclosure in its report on the PIA 2021 stating its Impact on Federation Revenue
The five major IOCs operating in Nigeria which have been divesting their assets include Shell Producing Development Company, TotalEnergies, Chevron, ExxonMobil and Eni.
Recall that in the past 11 years, IOCs operating in Nigeria had divested a total of 26 Oil Mining Licences in the Niger Delta with more set to be sold.
RMAFC said one of the reasons for the IOCs divestment of their onshore and shallow water assets despite the reduced taxes and royalty rates in the PIA is because of the declining productions.
“Before the passage of the PIA, the IOCs were divesting from their onshore and shallow water assets due to hostile environment attributed to community restiveness and security challenges in the Niger Delta,” the commission stated.
It added, “Productions from some of the fields are already declining. The PIA as it were may not likely stop this trend. Increased crude oil theft, which is now an organised crime.”
It noted that the three per cent operation cost to be paid to the Host Community Development Fund might not be technically applicable to deep offshore.
“As a result, the IOCs are likely to be more interested in deep water assets where the tax and royalty rates are lower with no community disturbances and no crude oil theft.
A typical case is Mobil Producing Nigeria in Akwa Ibom offshore,” the commission stated.